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Who is Sonny's counterparty on Bitso?


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Thank you @LordVetinari You have been my most important XRP friend in trying to find the answer. All the way since we started beta-testing XRP UNITED... when was that..? Seems like a year has pas

IMO yes. Bitso does have bots making markets in their exchange. So does Bitstamp, Bittrex, Coinsph and other future xRapid exchanges. However, I would not be surprised if Ripple is helping them to kic

My reasoning of the functionality of xRapid in above was inspired by the research conducted by @BehindtheLedger in below tweet.  

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On 1/19/2019 at 9:35 AM, LordVetinari said:

I believe it would be an account registered by SuperFI

I would also imagine SuperFI to be the counterparty. If Bitso buys the XRP to sell to SuperFI, as @hallwaymonitor describes, then I would also agree Bitso is the counterparty.

Who is actually purchasing the XRP in the xRapid transaction? Bob's bank, SuperFI, or Bitso, in the case Bitso acts as a dealer rather than a broker.

I don't see how Ripple would be the counterparty of anything, unless we're arguing that they are liable for everything going through xRapid? Can't Ripple just put a clause in the xRapid terms "we're not liable".  

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2 minutes ago, Wandering_Dog said:

.

Who is actually purchasing the XRP in the xRapid transaction? Bob's bank, SuperFI, or Bitso, in the case Bitso acts as a dealer rather than a broker.

I don't see how Ripple would be the counterparty of anything, unless we're arguing that they are liable for everything going through xRapid? Can't Ripple just put a clause in the xRapid terms "we're not liable".  

1. Random customers in receiving end’s exchange. Could be tens of thousands accounts depending on the size of the ”buy fiat with XRP”

 

2 xRapid is cross-border payment and settlement without counterparty risk. XRPL is the counterparty that removed risk in xRapid. When xRapid executes, it will settle funds to receiving bank’s account. This removes counterparty risk.

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2 minutes ago, P3T3RIS said:

1. Random customers in receiving end’s exchange. Could be tens of thousands accounts depending on the size of the ”buy fiat with XRP”

That doesn't make sense. If some customer buys the XRP from Sonny and SuperFI does not, and SuperFI does not acquire XRP in any other way,, then SuperFI doesn't have XRP to further the transaction, and the transaction should halt. 

 

2 minutes ago, P3T3RIS said:

2 xRapid is cross-border payment and settlement without counterparty risk. XRPL is the counterparty that removed risk in xRapid. When xRapid executes, it will settle funds to receiving bank’s account. This removes counterparty risk.

That also doesn't make sense. If SuperFI borrows the reserves to pay the exchange for the XRP and then SuperFI later defaults on that debt obligation, the risk was simply moved forward in time and to a different party. You can't eliminate risk of nonpayment in a credit system without the Gov. 

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38 minutes ago, P3T3RIS said:

@Wandering_Dog if you do not believe me, that is just fine. But counterparty is the corporate that arranges all that. That is the exchange. It is their responsibility to pay out your funds.

You may receive your funds, but the probability that someone defaults somewhere else in the system can remain non-zero. It depends on the sources of the funds involved in the transaction. 

In this context, perhaps the slogan "zero counterparty risk" is justified, as the end users' transaction is satisfied. But the risk in the system created by the transaction remains unchanged. 

For example, if SuperFI did not have the reserves, and sought them out in the interbank money market by repo'ing a mortgage backed security. The entire transaction in the traditional system may be waiting for SuperFI to close it's repo position the next day before all parties consider the transaction settled, hence the risk in the transaction, SuperFI may not get those funds in time, and the transaction could be reversed.

However, in the case of our xRapid example, the transaction cannot be reversed (it can, but requires parties on RippleNet to agree before the fact to another transaction on the ledger that corrects the situation). In this case, the risk is put on another balance sheet at a different time.   

 

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6 hours ago, Wandering_Dog said:

I would also imagine SuperFI to be the counterparty. If Bitso buys the XRP to sell to SuperFI, as @hallwaymonitor describes, then I would also agree Bitso is the counterparty.

Who is actually purchasing the XRP in the xRapid transaction? Bob's bank, SuperFI, or Bitso, in the case Bitso acts as a dealer rather than a broker.

I don't see how Ripple would be the counterparty of anything, unless we're arguing that they are liable for everything going through xRapid? Can't Ripple just put a clause in the xRapid terms "we're not liable".  

When people talk about xRapid, we hear things like, "xRapid buys XRP". Technically, that is as vague as saying, "a battery moves the hands of a clock." 

Please keep in mind, "counterparty" in relation to my question, is a single name, likely a named account which is under the control of some company, which would appear in a "trade history" log entry that identifies the account on Bitso that bought Sonny's XRP. Someone, either Bitso, Ripple or SuperFI requires an account on Bitso. 

Sonny clearly has an account on Bitso. Maybe named "sonny922".

Bob and Mary likely don't have accounts on Bitso. So Bob would not be the "counterparty". 

I'm trying to understand how all the individual participants, in all the individual steps of an xRapid transaction interact.

Hope that helps.

@P3T3RIS KYC/AML is also something to consider. I haven't had time to do so. Off to work but I will consider how that factors in. 

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5 hours ago, LordVetinari said:

When people talk about xRapid, we hear things like, "xRapid buys XRP". Technically, that is as vague as saying, "a battery moves the hands of a clock." 

Please keep in mind, "counterparty" in relation to my question, is a single name, likely a named account which is under the control of some company, which would appear in a "trade history" log entry that identifies the account on Bitso that bought Sonny's XRP. Someone, either Bitso, Ripple or SuperFI requires an account on Bitso. 

Sonny clearly has an account on Bitso. Maybe named "sonny922".

Bob and Mary likely don't have accounts on Bitso. So Bob would not be the "counterparty". 

I'm trying to understand how all the individual participants, in all the individual steps of an xRapid transaction interact.

Hope that helps.

@P3T3RIS KYC/AML is also something to consider. I haven't had time to do so. Off to work but I will consider how that factors in. 

Sounds like you answered your own question.

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31 minutes ago, Wandering_Dog said:

Sounds like you answered your own question.

No, I'm still not certain if it's Bitso, Ripple or maybe but unlikely, SuperFI. And that's because in other threads people have said it's not OTC. 

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1 hour ago, Wandering_Dog said:

Well, who is buying the xrp? 

If SuperFI is buying, through Ripple's software, its SuperFI isn't it?

So as part of the on-boarding of a new client to xRapid, clients must have or create accounts on each exchange? That would be the only way SuperFI would appear in a log file. I have also considered that as a possibility. But I think it would not be the most efficient configuration.

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The more I think about this, the more I believe it's Ripple that has the account. 

1a. If it was SuperFI, that would mean SuperFI would need to open and possibly prefund accounts on any exchange it would use as part of their xRapid transactions. That would mean, an account at Bitso and BitStamp. To prefund and withdraw fiat would likely require KYC/AML verification and if an exchange has "real-name" verification, that would exclude large numbers of potential partnerships. 

1b. In this example it's just Bitso. But what if SuperFI decided to add another exchange that offers XRP/MXN at a later date. Now SuperFI has two sources for XRP/MXN. Can they only buy from one at a time? Are they able to source 25% from one and 75% from the other? Sounds inefficient. It would be better if Ripple has two accounts, one on each exchange. Ripple could then very efficiently source XRP from multiple exchanges that offer XRP/MXN. 

2. Bitso is the account holder. The problem is that would mean xRapid obtains the XRP OTC and specifically, not using the public order book. A Bitso bot would buy up some amount of XRP. Let's say 5000 XRP. The bot would likely have to buy from multiple users on Bitso, let's say 5 trades of 1000 with 5 Bitso user accounts. The bot pays each user, Sonny would have been one of them, and the 5000 is bundled up and delivered to Ripple and Bitso received payment for the 5000, from Ripple. That would be OTC, correct? 

That leaves a Ripple account as a likely counterparty. I've still not had time to consider how KYC/AML plays into it but it may be advantageous for Ripple when you look at the other two possible configurations. 

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2 hours ago, LordVetinari said:

So as part of the on-boarding of a new client to xRapid, clients must have or create accounts on each exchange? That would be the only way SuperFI would appear in a log file. I have also considered that as a possibility. But I think it would not be the most efficient configuration.

I imagine the software xRapid, or whatever it is called (RippleNet), eliminates such a need for individual account creation, it is a centralized platform. 

So, when on boarding to xRapid you create an xRapid account, and everyone on the service is linked. Its more likely firms submit exclusions, people they are not permitted to connect to. I think Ripple actually already explained that even.

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3 minutes ago, Wandering_Dog said:

I imagine the software xRapid, or whatever it is called (RippleNet), eliminates such a need for individual account creation, it is a centralized platform. 

So, when on boarding to xRapid you create an xRapid account, and everyone on the service is linked. Its more likely firms submit exclusions, people they are not permitted to connect to. I think Ripple actually already explained that even.

I agree. Sounds cumbersome for each client to have multiple accounts across geographic locations.

I would think it's most efficient if Ripple had accounts on each exchange, especially as new exchanges become xRapid partners. Right now there is only 1 exchange in Mexico offering XRP/MXN. If there were 2 or 5 or 10 exchanges offering a specific pair, xRapid could much more efficiently know how much XRP was available at any given moment. Even more efficiently than if exchanges ran their own bots that xRapid communicated with. 

Thanks very much. 

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1 hour ago, LordVetinari said:

The more I think about this, the more I believe it's Ripple that has the account. 

1a. If it was SuperFI, that would mean SuperFI would need to open and possibly prefund accounts on any exchange it would use as part of their xRapid transactions. That would mean, an account at Bitso and BitStamp. To prefund and withdraw fiat would likely require KYC/AML verification and if an exchange has "real-name" verification, that would exclude large numbers of potential partnerships. 

Why does SuperFI need to prefund a deposit account on an exchange in its own territory? It's using its reserves in its CB account on the CB ledger, which are transferred to the exchange's CB account, and the exchange transfers the XRP to SuperFI (temporarily, in name only). There is no need to prefund anything, everything is happening in the same jurisdiction.

 

1 hour ago, LordVetinari said:

1b. In this example it's just Bitso. But what if SuperFI decided to add another exchange that offers XRP/MXN at a later date. Now SuperFI has two sources for XRP/MXN. Can they only buy from one at a time? Are they able to source 25% from one and 75% from the other? Sounds inefficient. It would be better if Ripple has two accounts, one on each exchange. Ripple could then very efficiently source XRP from multiple exchanges that offer XRP/MXN. 

I don't think SuperFI cares, they certainly won't be adding exchanges--all exchanges are already available, that's the point of the software. xRapid goes and gets all the XRP SuperFI needs from all over the place in that jurisdiction, for example, US exchanges. 

If SuperFI wanted to purchase XRP from a non-US exchange, that can also be done, but that is more complex, as the non-US exchange either needs an account at the Fed, or has to have a way to convert USD_R to it's domestic reserve currency--this is certainly possible as well, but it's another step, and I'm not sure if this is a part of xRapid or a part of the 2 firms own systems.  

 

1 hour ago, LordVetinari said:

2. Bitso is the account holder. The problem is that would mean xRapid obtains the XRP OTC and specifically, not using the public order book. A Bitso bot would buy up some amount of XRP. Let's say 5000 XRP. The bot would likely have to buy from multiple users on Bitso, let's say 5 trades of 1000 with 5 Bitso user accounts. The bot pays each user, Sonny would have been one of them, and the 5000 is bundled up and delivered to Ripple and Bitso received payment for the 5000, from Ripple. That would be OTC, correct? 

If Bitso is buys XRP from Sonny and uses it, then the XRP going to SuperFI is Bitso's XRP, but Bitso is the counterparty to Sonny.  

 

1 hour ago, LordVetinari said:

That leaves a Ripple account as a likely counterparty. I've still not had time to consider how KYC/AML plays into it but it may be advantageous for Ripple when you look at the other two possible configurations. 

I think you are making it more complex than it needs to be.

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